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Determinants of semi-formal credit participation among rural farm households in Kakamega County, Kenya

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  • Mukhwami, Johnworker Toywa
  • Gathungu, Edith Wambui
  • Kalio, Aquilars Mutuku

Abstract

Recently, devolved governments in Kenya have been offering semi-formal credit programs to rural households. Despite the key role of this type of credit in enhancing rural household welfare, little is known on the determinants of rural farm household participation in the credit programs. Therefore, this study aimed to identify the factors influencing farmers’ participation in the semi-formal credit program in Kakamega county. It embraced the quantitative research method. A multi-stage sampling approach was used to gather data from 179 respondents. The data collected was analyzed using descriptive statistics and a probit model on STATA software. The results indicate that the semi-formal credit accessed by rural farm households was allocated to both on-farm and off-farm enterprises. Also, factors that significantly influenced household participation in semi-formal credit included farming experience, occupation of the head of the household, group membership, distance to credit source, distance to the nearest market, and access to financial training. Based on the study results, different stakeholders should offer financial training, thus equipping farmers and entrepreneurs with the skills required for effective credit access and utilization. In addition, lending institutions need to consider bringing services closer to farmers and entrepreneurs to reduce the transaction costs incurred in accessing loans. On top of this, farmers and entrepreneurs need to be encouraged to join socioeconomic groups and engage in sustainable off-farm activities so that they can access useful information on credit access and utilization.

Suggested Citation

  • Mukhwami, Johnworker Toywa & Gathungu, Edith Wambui & Kalio, Aquilars Mutuku, 2022. "Determinants of semi-formal credit participation among rural farm households in Kakamega County, Kenya," Journal of Agribusiness and Rural Development, University of Life Sciences, Poznan, Poland, vol. 63(1), January.
    • Handle: RePEc:ags:pojard:356178
    DOI: 10.22004/ag.econ.356178
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    References listed on IDEAS

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    1. Constantin Johnen & Martin Parlasca & Oliver Mußhoff, 2021. "Promises and pitfalls of digital credit: Empirical evidence from Kenya," PLOS ONE, Public Library of Science, vol. 16(7), pages 1-14, July.
    2. Samuel Sekyi, 2017. "Rural Households' Credit Access and Loan Amount in Wa Municipality, Ghana," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 506-514.
    3. Wim Verbeke & Ronald W. Ward & Jacques Viaene, 2000. "Probit analysis of fresh meat consumption in Belgium: Exploring BSE and television communication impact," Agribusiness, John Wiley & Sons, Ltd., vol. 16(2), pages 215-234.
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